Palm Oil to Rise Above 3,000 Ringgit, Mistry Predicts

By Claire Leow

May 18 (Bloomberg) -- Palm oil futures traded on the Malaysia Derivatives Exchange could exceed 3,000 ringgit ($841) a metric ton “very quickly” because of a “strong” increase in consumption and production problems, an industry analyst said.

There was “a powerful bull market which has yet to realize its full potential,” Dorab Mistry, director of Godrej International Ltd., said today in remarks prepared for an industry conference in Tokyo. Palm oil traded today in Malaysia at about 14 percent less than Mistry’s target threshold.

India, the largest consumer of palm oil after China, may boost consumption of all vegetable oils to 12.8 kilograms per head per year in the 12 months to October, about 12 percent more than the year before, Mistry said in the remarks. Godrej is one of the largest importers of edible oils into the Asian country.

“Price-conscious markets like India will chase palm,” he wrote in the address, saying there had been a “phenomenal” rise in the nation’s usage of vegetable oils. “India’s imports of vegetable oil will continue to exceed the previous year.”

Palm oil for July delivery dropped 3.2 percent to 2,580 ringgit a ton at the 12:30 p.m. trading break. Still, the world’s most consumed cooking oil has advanced 52 percent this year. In 2008, the contract plunged 44 percent amid the global recession.

‘Create Inflation’

“It is not wise for me to speculate on how high prices will go,” Mistry wrote, without giving a precise palm forecast. “However, the powerful injection of liquidity in all our economies must create inflation at some point down the road.”

Central banks worldwide have been printing money to combat the global recession, triggering concern that inflation may accelerate. Some investors buy commodities, including palm oil, to hedge against increasing consumer prices.

Palm oil exports from Malaysia to India in the first four months of the year more than tripled to 608,440 tons, according to independent cargo surveyor Societe Generale de Surveillance. The surge made up for the 12 percent drop in exports to China to 1.14 million tons from the same period a year ago, SGS said.

Global demand for five major edible oils including palm oil and soybean oil will probably rise by 4.5 million tons in 2008- 2009, matching the increase the previous year, Mistry said. Still, global supply growth will slow to 2.85 million tons compared with 5.65 million tons in the last crop year, he said.

Mistry didn’t give a forecast for soybean oil, while highlighting a reduced soybean harvest in Argentina, and lower- than-expected planting in the U.S. Soybean oil traded in Chicago has gained 12 percent this year to 37.66 cents a pound at 12:45 p.m. Singapore time. The oil trades at a 14.9 percent premium to palm oil, according to Bloomberg data.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net